March 10, 2010
CURRENCY UPDATE
This month’s Pound/Dollar update from our colleagues at Moneycorps:
How low can Sterling go?
February proved to be another uncomfortable month for Sterling as the US Dollar pushed the Pound below the key market level of $1.50. Both UK and US GDP figures for the 4th quarter of 2009 were revised up, 0.3% and 5.9% respectively – a clear indication of the rate of recovery in the US and the bumpy road ahead for the UK.
And so the Dollar remains in a strong position with traders buying on strong US fundamentals and buying even more aggressively as a safe haven play. Traders, frightened by continued concerns over Greek national debt, the possibility of the Spanish government following suit, and renewed concerns over Dubai World once again asking to delay its debt repayments, are moving into long Dollar positions.
As the deadline fast approaches for Prime Minister Gordon Brown to call a general Election in the UK, opinion polls have taken center stage in setting traders’ sentiment about the Pound. Brown’s labor party closed the gap on the conservatives to just six points, suggesting the possibility of a hung parliament. With neither party having a clear majority, this would render the Prime Minster unable to effectively tackle Britain’s very serious deficits. The time between now and the election will be dangerous for the Pound, with only more downward pressure expected.
Recent Trading Range: $1.48 – $1.58
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